TMFDeej (99.21)

Two Accurate Predictions and one New One

9

Back in November, I mentioned that I was going to begin keeping an eye on Par Pharmaceutical (PRX) here in CAPS after the successful activist Relational Investors had acquired a substantial position in the company. It looks like Relational has done it again. Today, less than seven months later Par has reached an agreement to be acquired by TPG for $1.9 Billion and its stock subsequently popped 37%.

For those keeping score at home, and I was only in CAPS not with real money, this amounts to a 67% gain in the stock since late-November. Not too shabby.Par Pharmaceutical Pops 37% On $1.9 Billion TPG Sale

In other activist investor news, Bill Ackmann has been given clearance to take a position in the dividend master Procter & Gamble (PG). This situation is very similar to my investment in Pepsi (PEP), a solid, dividend-paying company that has activist investors circling, which may ultimately result in some sort of special situaion that boosts the share price. I like it.

Perhaps an even more appropriate situation to compare this to is Ackman's recent success with Fortune Brands (FO). He took a position in that conglomerate, ultimately forcing it to split up, unlocking significant value in the process.

The only problem with this situation is P&G's massive size. It is rumored that Ackmann took his largest initial position ever in the company...over $2 billion...and that would still amount to around only 1% of the company's stock. One has to wonder hoe much influence this flea can have upon this elephant.

As I mentioned, this looks like a really interesting one to me, but I haven’t pulled the trigger on it in real life yet. I'm still mulling it over. I love PG's strong history of paying a solid dividend and the fact that there is a successful activist involved here who could ultimately lead the company to break up into parts. However, as I mentioned, I'm not sure how much power Ackmann has over this behemoth and I'm somewhat concerned about the slow European economy weighing on PG's results in the near future.

I'd love to hear others' thoughts.

Oh, in other special situation investing news, stock in Phillips 66 (PSX) has soared over the past two days on news that Buffett's Berkshire Hathaway has been selling shares of ConocoPhillips to increase its position in PSX.

I wrote about this situation and increased my position in Phillips 66 back in June, quoting Meryl Witmer's excellent comments on the company in Barron's mid-year Roundtable.

Hidden assets enable investors to get the business that this company is best known for for free